pri Benefits for small companies under companies Act, 2013 Benefits for small companies under companies Act, 2013

Before filing of annual return of any company we should know some key points like:

♣ what the status of our company

♣  what benefits/Exemptions available for our company

There are some Benefits / exemptions for small companies that every Stakeholder should remember before filing of annual return of their company.

Definition of Small Company:-

As per section 2 (85) of Companies Act, 2013

“Small company” means a company, other than a public company,—

(i) paid-up share capital of which does not exceed fifty lakh rupees or such higher amount as may be prescribed which shall not be more than *ten crore rupees and**

(ii) Turnover of which *** [as per profit and loss account for the immediately preceding financial year] does not exceed two crore rupees or such higher amount as may be prescribed which shall not be more than **** [one hundred crore rupees]

But following companies are not falls under the category of small company even though they comply above 2 conditions 

  • a holding company or a subsidiary company;
  • a company registered under section 8 of Companies Act, 2013
  • a company or body corporate governed by any special Act;

In simple language we can say that when a Private company satisfies following conditions then company will cover under the category of small company:

  • Paid up share capital of private company shall not exceed 50 lakh rupees and
  • the turnover of the company shall not exceed 2 crore rupees

Because of any reason if in the next year company cross the above prescribed limit either for paid-up capital or turnover, company will not cover under the category of small company and company needs to give up all the Benefits / exemptions get under the small company category.

Benefits / exemptions for small company

  • Board Meetings: – Small companies doesn’t have a wide range of business so it’s not required for small companies to hold 4 board meetings in year, small companies may hold only 2 board meetings in a calendar year, i.e. one Board Meeting in each half of the calendar year with a minimum gap of ninety days between the two meetings.
  • Rotation of company auditors: –It is not necessary for small companies to follow the condition laid in Section 139(2) of the Company Act 2013, which mandates the rotation of auditors every 5 years (individual auditors) and every 10 years (firm of auditors).
  • Exemptions for Board’s Report: – Matters to be included in Board’s Report mention in Rule -8 of companies (Accounts) Rules, 2014 not apply for small company.
  • Annual Return: – Annual Return of a Small Company can be signed by the company secretary alone, or where there is no company secretary, by a single director of the company.
  • Remuneration details in Annual Return : – As per section 92 of companies Act, 2013 private companies are require to give a details of remuneration of directors and key managerial personnel , but in small companies only “aggregate amount of remuneration drawn by directors”  is required in annual return.
  • Cash Flow Statement: – A small company needs not to include Cash Flow Statement as part of its financial statement.
  • Exemptions for Audit Report: – small companies are not required to give report on internal financial controls with reference to financial statements and the operating effectiveness of such controls in audit report.
  • Lesser penalties for Small Companies under Section 446B of the Companies Act, 2013: – If a small company fails to comply with the provisions of section 92(5), section 117(2) or section 137(3), such company and officer in default of such company shall be liable to a penalty which shall not be more than one half of the penalty specified in such sections.

 *Substituted by the Companies (Amendment) Act, 2017 :- Effective from 7th May 2018

 In clause (85), in sub-clause (i) for the words “five crore rupees” the following words shall be substituted, namely:-“ten crore rupees”

 **Substituted by Companies (Removal of Difficulties) Order Dated 13th Feb 2015.

In section 2, in clause (85), in sub-clause (i), for the word “or” occurring at the end, the word “and” shall be substituted.

***Substituted by the Companies (Amendment) Act, 2017:Effective from 7th May 2018

In clause (85), in sub-clause (ii), for the words “as per its last profit and loss account” the following words shall be substituted, namely: – “as per profit and loss account for the immediately preceding financial year

****Substituted by the Companies (Amendment) Act, 2017:- Effective from 7th May 2018

In clause (85), in sub-clause (ii) for the words “twenty crore rupees” the following words shall be substituted, namely:-“one hundred crore rupees”

(Author Name – CS Jitendra Sharma, JITENDRA S & ASSOCIATES Company Secretary in Practice from Kota (Rajasthan) and can contact at pcsjsandassociates@gmail.com )

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Qualification: CS
Company: Jitendra S & Associates
Location: Kota, Rajasthan, IN
Member Since: 23 Aug 2019 | Total Posts: 3

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